I'm the 'unknown' that started with the 'don't you guys get it, illegal TVRs are illegal' post.
Re the legality: my understanding is that the illegal construction aspect of many TVRs is a civil misdemeanor, while the failure to pay the hotel tax and the income tax evasion are criminal acts. Pls note that the illegal construction WILL ultimately need to comply, in some cases this is as simple as removing kitchens etc, but in many cases entire structures built for the sole purpose on running an illegal business will need to be torn down.
Re Longterm vs short term: A longterm unit that would bring in $1500 - 1800 per month can easily earn $100 per night or $3000 per month. Putting the 1500 plus illegal units in Haiku back into the long term rental pool would increase the supply enough that those rents would probably drop to about 1999 levels - $1100-1600 per month. So you can see the cost to the community that lives here is VERY high, both in terms of what is available, and how much they need to pay every month.
As has been pointed out in another post, the Maui water supply is pretty well tapped out at the moment, and will soon be further taxed by the 3000 plus water meters that will come on line in the next year in high demand areas like Wailea.
To that, I would like to add that there are plenty of houses for the current population already - everyone who wants to lives under a roof. The issues are:
1) How much do they pay for that roof
2) What are the chances of them ever owning the house that goes with it.
On Maui's north shore, people who care about the community and the long term viability of Maui as a nice place to live, grow up, and perhaps ultimately raise a family have realized that illegal TVRs are making those things a LOT more difficult while giving almost nothing back - the budget minded renters are hardly the cornerstone of our billion dollar tourism economy.
The fact that they are also illegal makes the issue pretty much a no-brainer for anyone who does not have a vested financial interest in the 'business'.